Correlation Between Settlebank and Lotte Data

Can any of the company-specific risk be diversified away by investing in both Settlebank and Lotte Data at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Settlebank and Lotte Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Settlebank and Lotte Data Communication, you can compare the effects of market volatilities on Settlebank and Lotte Data and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Settlebank with a short position of Lotte Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Settlebank and Lotte Data.

Diversification Opportunities for Settlebank and Lotte Data

0.44

Correlation Coefficient

Settlebank  Lotte Data

Very weak diversification

The 3 months correlation between Settlebank and Lotte is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and Settlebank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Settlebank are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Settlebank i.e., Settlebank and Lotte Data go up and down completely randomly.

Pair Corralation between Settlebank and Lotte Data

Assuming the 90 days trading horizon Settlebank is expected to under-perform the Lotte Data. In addition to that, Settlebank is 1.26 times more volatile than Lotte Data Communication. It trades about -0.06 of its total potential returns per unit of risk. Lotte Data Communication is currently generating about 0.03 per unit of volatility. If you would invest  1,874,550  in Lotte Data Communication on December 26, 2024 and sell it today you would earn a total of  45,450  from holding Lotte Data Communication or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Settlebank  vs.  Lotte Data Communication

Settlebank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lotte Data Communication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Data Communication are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lotte Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Settlebank and Lotte Data

The main advantage of trading using opposite Settlebank and Lotte Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Settlebank position performs unexpectedly, Lotte Data can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lotte Data will offset losses from the drop in Lotte Data's long position.

The idea behind Settlebank and Lotte Data Communication pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.